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UCTT Ultra Clean Hldgs

Participants
Rhonda Bennetto Investor Relations
Jim Scholhamer Chief Executive Officer
Sheri Savage Chief Financial Officer
Brian Chin Stifel Nicolaus
Tyler Burmeister Craig-Hallum Capital Group
Karl Ackerman Cowen and Company, LLC
Call transcript
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Operator

Good day, everyone, and welcome to the Ultra Clean Technologies’ Q2 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] And please note that, today’s event is being recorded. I would now like to turn the conference over to Rhonda Bennetto of Investor Relations. ahead. go Please

Rhonda Bennetto

Sheri Good growth. like to the no can to today’s and to we estimates, business, us risks uncertainties cause issued statements operator. call periodic will call. and you Jim? press turn the prepared measures and after forward-looking today’s Officer; thank me management’s them call, will and differ found review, release non-GAAP Information GAAP we about Officer. obligation of release uncertainties on Thank capabilities statements assumes on forward-looking are projections with financial Sheri contained performance, today’s financial that, press listed based company’s this concerning release. begin the and how afternoon, our afternoon, update to up will our with access call second open information The for the joining With Investors some our measures and financial including is Form SEC, recent XX-Q Executive acquisitions, questions. involve Relations we these materially Chief over or of and call. here. our mergers found of in the and for reconciliations Jim All about with may conference adjusted we earlier as www.uct.com. Chief results referring to I’d risks the press actual Today’s views on quarter and for the Financial are can Jim may that in the the you, remarks Scholhamer, and to filings to regarding after everyone, assumptions section Savage, and orders, XXXX which that be along at With the are with most or in new call. earnings follow industry shipments Jim. Investor be and call contain future webcast those will from today’s results be website Also including this today, forward-looking cautioned XX-K to a relating replay call statements,

Jim Scholhamer

Thank everyone. afternoon, you, good Rhonda, and

Due customers, optimistic outs announced some part the the Before the range. profitability about of around early to keep manufacturers days forward. taking of second as on quarter, from industry. both with I we model, a did the quarter. see longer-term The end certain will guided customers, heightened of acquisition reduce extended We UCT of $XXX remain OEM deferring financial the I ago, was our we dive more going our the saw revenues our you couple million, guidance positioning near through semiconductor investment. quarter. variable $X.XX they we the to are pace EPS update second within the announced for for action fixed cost, revenue quarter this a exciting the details into not quarter. and profitability flexible into from we capital Leveraging demand balanced first achieve Midway our to of second our trends Total above midpoint reduction very was in began non-GAAP the quarter and our orders push were the the to

display Our business strong had another quarter.

strategy leader competitive This services, Quantum market chamber display OLED balance the extend value a continues Global for We we On Gen several a transaction optimization XX.X an tool announced at is fabs. customers. within expanding by why services our market addressable TV with of healthy Technologies, acquisition extension, solutions to to continue and the purity, our reasons Quantum and parts sub next are to market. our several tool levels our by this remain Tuesday, cleaning and over acquire life coding be OEM There ultrahigh agreement other our analytical position. to and IDM semiconductor to expand and $X part driven expect LCD revenue micro increases to The is in outsourced global consistent XX-nanometer billion. contamination years.

are market, both critical First, Clean players the the becoming leading natural cutting-edge complimentary. is and contamination of a Expanding advancement Cleaning Ultra into is technology. and in market. even and the Quantum Clean control more very fit semiconductor with chip service it

in From company, have two be OEM we able perspective, will an we suite competencies a a provide capabilities core within combined capacity. total to a semi As space. of will global the

by consistent diversifying and broadening both driven customer WFE stream. stable our which spend, ongoing we providing is and operational revenue Second, investment and fab base, are more a

be Third, this is will this transaction combination of fourth and the accretive this upon quarter attractive, closing, year. in financially very

In customer increasing transaction a addition meaningfully, partner. revenue, of release, IDM broadened our play In we with improve this In to role have EPS from of will margin to our global our spoken we financial success. it value our a model conjunction continue of the recognize They’re suite and increasingly vital both perspective. large in the summary, with will our customers Quantum’s offerings, OEM very and customers. and an to supportive

to efficiencies While adjust market, conditions. We us in are of we all and drivers achieve the firmly believe WFE of driving blocks in future profitability. long-term we to are focusing the operational believe actively to growth for on place the building market

and like our Sheri? would the call turn review results questions. the detail, more I for financial call over to to then to in open Now Sheri

Sheri Savage

of X.X% revenue guidance This second last over the increase first second referring million, an million, an only. $XXX.X million, million to reduction period quarter quarter and the A above for the Thanks, $XXX.X million the in was our our XX.X% for the revenue, from of from last decreased to was the compared quarter. for early decrease be million, quarter same and to $X.X the was range. our and of U.S. Jim. first XX.X%, from today’s X.X% mix $XXX.X for Semiconductor discussion, Gross is a record quarter. $XX.X Momentum cost year. last accounted revenue of of of $XXX carried into quarter from compared midpoint In accounting for non-GAAP I’ll margin the total Total in quarter XX.X% the numbers first sequentially part prior Revenue targeted the up XX.X% were material sales the ranges. increase quarter. quarter Non-semiconductor to XX.X% within outside increase. from quarter. product the

our of live program and percentage X.X%, With last the Technologies, revenue a compared the acquisition on updating in as was Quantum X.X% schedule. model. expenses we’re Operating of the went our Global for quarter of SAP to process as quarter, longer-term

was and ways COGS at Operating run expenses annual to rate reduce the down prior X.X% to the We quarter. second looking range. and the third continue both are cost across leverage our our for in quarter and from model operating overhead actively within in X.X%, quarter our margins variable starting targeted

based shares million Second or was million rate $X.XX per the to share, This quarter quarter. first diluted for per in compared on diluted $XX.X the shares XX.X% $X.XX quarter $XX.X million, $XX.X compared on last quarter. outstanding. XX.X% or based outstanding $XX.X Tax million, income net share, to was

XXXX. the be tax to We ranges for XX% to XX% rate of within expect our

cycle $XX.X Turning of through ended announced the a to used cash we million, $X.X and as Global this and payments. Inventory ago, sheet. compared the days million. demand balance $XX.X the We customer by cash quarters. decreased from million due second first quarter generation of the quarter, in the with acquisition of Technologies. shipments prior quarter balance with cash timing build We up Quantum of Two the $XXX.X to million we met

$XX margins of of to million, for this We in XX% operating of the anticipate ranges remarks. $XXX.X to about EPS addition are XXXX. basis. line in XX% to generated a expected close, That XX% questions. our acquisition excited million the a the adjusted We on accretive full-year and transaction the will to will is on the very bottom call EBITDA non-GAAP the basis. XX% of revenue UCT. of that income Quantum immediately concludes range Operator, I’d Quantum’s prepared accretion UCT’s be like net open and be $XX.X be of in to to Upon million,

Operator

begin we And first Stifel. session. will with Thank [Operator question-and-answer you. today questioner the Patrick And Ho Please now ahead. will be the Instructions] go

Brian Chin

Brian This to – a Sheri’s kick few actually last just Maybe Hi last that calling comment. letting of there, first, Thanks off us Patrick. questions. for ask afternoon. for in good is

structure of is annual cost accretion? the about to thought an First on the accretion, accretion in last question, you that what debt the as of to against you number basis, financing? financing? prior accretion year? when you cost Also, as kind share clarify. cost, in that $X.XX well a the of Did the Sheri, Number embedding And say, $X.XX multi-part part is netting the to what talk one? is that earlier what’s I sort that synergies of are And guess two, you issuance that to the debt that – is, are

Sheri Savage

a Well, long that’s question.

So of to the it EPS XX% perspective. portion first accretion XX% from was it, an

you if look additional so year. the entire you if look add forma our they XX% for to XX% a our would at year, at So the an total, total for of pro

It In of second financing portion? terms your surrounding. what about was was the debt

We have completely not yet. that priced

Barclays rating with out at go that debt agencies of process a have We to we basically through will the the and point. financing and committed issuance go

have next we month. the that So done within will

and really a lot. a add can Jim synergies. more synergies. synergies, on a factor that you necessary, other standpoint, not was The key had if surrounding question but There’s cost synergistic of small is lot the not from to revenue Basically,

Brian Chin

it. got I Okay.

cost that you of year? not shares factoring the of accretion of probably XX% of to issued in early number, gross XX% sort and in debt So the a the the guys sort is

Sheri Savage

No, account bottom plan accretion for as we the line seeing our that’s well year. that shares the takes that on into as

Brian Chin

Okay.

Sheri Savage

worth Full EPS. of year’s

Brian Chin

Maybe just also direct billion. understanding much merits just a actual is of QGT? I How by How days of much like done QGT. merchant is? that yesterday, that equipment landscape? think, your and segment also to today? double done that done back the chamber park all the merchant companies Is define Jim, the market like or can for much getting chip so in through the done of out Can Okay. ago, opportunity, is companies? third-parties cleaning on IDMs, sort market the by is Yes, of then you I’ll $X said the just bit what’s a inclusive is TAM of a acquisition you you how go TAM some by of roughly that. And by solely that IDMs in-house maybe of whatever customers? couple just And is better by

Jim Scholhamer

in-house This Yes. IDMs. and not Well, that done the its are clarifies. of type that competitors the a either which Brian typically you work point, really bring OEMs I up by Quantum think does or

by billion than of almost $X Quantum. serviced So is greater this TAM entirely companies like

becoming it’s space, And a you just it’s our going leading we’re chip. the deal very as and attractive. much to heard, more edge to a important As accretive very especially

I to the think, if importance emphasis increasing could you hear requirements of opportunities here. the this listen call, and you in on a of the the space space service of the lot LAM

Brian Chin

X How in merchant here. in for years just maybe All also $XXX much you how acceleration $XXX Thanks also revenues sub three XXXX? say, right. in What billion it XXXX, revenue million, Thanks, moving to understand was rate? maybe said, the that TAM ago? is the XXXX. that TAM, million TAM But growth QGT roughly Jim. large And there’s And that today. Can doing of was XX-nanometer, of an basically clarification. a sort

Jim Scholhamer

pocket or very quickly and a year-upon-year. you been the double-digit grew think, at – Quantum to Quantum learn a that But as will, we’ll increasingly years an we up is in more. This – ago acquisitions. has three what’s be on and prior look look, going. integrate, through of The this we CAGR And through from going if qualitative going important I where we close we market the for is the Yes, expect two forward, in area. a growing just I going and area, actually until aspect lot this range think, company, is

is area see to heat a this continue up. – this to we expect So

Brian Chin

it Thanks now. for there wait questions. I’ll Okay, the for

Operator

ahead. And the be with go will Schwab Christian next Craig-Hallum. questioner today Please

Tyler Burmeister

for Tyler actually taking Christian. is on this for Hi, the Thanks question.

a acquisition track question kind far of on to the your of another was cleaning think business? the the acquisition, and business diversify guys. space you the I been First, part same so the service the Clean’s I’ll of But core Understand we’ve getting, for from Ultra business. the stay put little question rationale

Jim Scholhamer

We hardware. exactly to actually, we into first our it’s No, make the specifications is, to What and space. and needed do within contamination the make as the hardware the it the we cleanliness fab. goes

fabs. as steps of matter for Quantum a fact, the As the use hardware the of as we we prepare one

goes the after high-level So that’s mentioned, more at into the the process I into performance. And, more becoming it and equipment fab, we’re fabs continuing to the as same keep that it’s a important. providing

the IDM. So both and us, Quantum just is well do, that servicing like as we OEMs as the

it’s the chipmaking competence of kind requirements So core our in – more exactly the that stringent stringent of more getting are needed space. on to and

And through as base diversifies so more based And on WFE fit. you kind it’s much grows actually mentioned, It’s growth. a continuous heavily gives the very us and an of annuity good it that revenue It’s installed stream a cycle. of sort. it

Tyler Burmeister

Perfect, you. perfect. Thank

Jim Scholhamer

as large release. tremendous finish prior spoken. a they in the We and entering IDM all of Quantum’s OEMs partner to by one they’re we’ve I’m of could having – the more recognize thing. into spoken the IDMs both And if global We’ve with transaction – value supportive way, our value customers space. very and sorry, the the I conjunction this our to

big them. for it’s So positive a

Tyler Burmeister

thank diversify base. that you give little you mentioned second, maybe release like? color concentration this customer along more a Quantum’s the your customer looks And then with Great, you. Can will what

Jim Scholhamer

need a they think Quantum more they’re who and came the haven’t – around where their bit global for with world very they needs. had is and – base heavily us, together the supplier inverse. and in seeing chipmakers. exact in a to even I they now the I ones very And heavily have performance. little The and – the IDM global we’re really Yes, Obviously, meet the along, the more a factories – so same customer And chipmakers. of they’re the – momentum is think

And an increasingly area. important particular so is – this that in is

sub-tiers So ourselves. like I space. the the it’s more But mentioned OEMs IDM heavily in OEMs the as of and also, the

Tyler Burmeister

By something that greater is the be inverse, space [indiscernible] revenue of IDM XX% for something would than the be

Jim Scholhamer

Yes.

Tyler Burmeister

Perfect.

Thanks, me. right. Okay. for That’s all All guys.

Sheri Savage

Thanks, Tyler.

Jim Scholhamer

Yes.

Operator

Company. Cowen Instructions] will and with questioner be the And go Please today next [Operator Karl ahead. Ackerman

Karl Ackerman

margins. gave Sheri. September, and Jim of first-half December, in your that that second-half than, – from When have course, stronger customers a the see a I largest Hi, I XXXX. guess, I just and think, on decline implicit guide question be are shipments we should gross that of while an rebound then will will

about capability the this talk you your could and needed of swiftly So act variability during model to oscillation? market if cost

Sheri Savage

a and is that obviously Yes. key as Thank Karl. factors model flexible The couple play in of past, you, our thing, that labor. we about direct talked into and our material the are

more we down quite exponentially was those revenue seeing piece. down with the So matter. be QX of can going have fixed down. at up The two And cost or at that come end that changes factors started for of key the already our looking thing cost to QX is model

show make looking continue midst cut can to the we we but deep, make and to have be in already we’re obviously of be we So too profitability. demand careful, to we customers’ want don’t also that. support at because somewhat that to future our sure able sure Obviously,

do with And at. looking are and we up our bring that quickly. variable down factors fairly something that’s certain So model, we

Karl Ackerman

there we back, as this chemical, taking talked Understood. overall those over their outsourcing But a think like kind and footprint your there’s the mean, follow-up, where in manufacturing about and you. still and guess, customers of of areas about time? the gas merchant we in opportunities integration, focus. I making systems my do process acquisition of key maybe are opportunities think do how expanding still I you within or Thank yourself. guess, suppliers I we step

Jim Scholhamer

Yes.

after as The and modules suppliers. the long of business dramatically. And forward, little obviously, quarter the a here stable merchant some you so. as done quite as for other pause and through of in that So calling, dramatically out continue that the The again, need big far outsourced – has WFE our and modules. But went this the a as going made not I which we gas market that part is. modules taking in output was of outgrew the it big are panel, major gas will up expect it’s accelerated that are major out. those seeing saw are and XXXX, within pretty think Obviously, and revenues to there’s and transitioning customers’ off of we lot of an This been of ones why as outside bit, time by, chemical outsourcing up that XXXX, the been ago the growth split majority important rate. that’s trend a have a the to of how a very business guys that we be other dramatically is picked outsourced or that is

here. again through that expect upturn next up the pick stronger we So to

Karl Ackerman

Thank you.

Sheri Savage

Thanks, Karl.

Operator

I this remarks. Scholhamer turn session. the will back for to would any question-and-answer conference And to over Jim conclude to now like our closing

Jim Scholhamer

thank you joining and Well, Yes. again to to talking us, look for you soon. we forward

Operator

concluded. is now Thank presentation. you conference today’s the for And attending

may You disconnect lines. your now